RES Market in Poland: Biomass and Biogas New Favorites - Wind and PV Seem Doomed

The biggest development in the renewable energy prospective market in Poland is the new amendment in the Sejm, which has passed the committee and appears to be sailing for rapid rubber-stamping by the rest of the government in Warsaw.

The single biggest characteristic of the law is the emergence of separate technology "baskets" for renewable energy auctions. The Polish Government figured out that it can control the mix of technologies by setting the size of the baskets as well as the reference prices (maximum allowed support in the form of a contract for the difference). Regardless of any other developments, it appears that this procedure will be used to skew the support away from PV and wind to biogas and biomass.

The characteristic being used to "make the cut" is the stability and reliability of the renewable energy source. The intermittent nature of PV and wind have led the Polish Government to put them into a less desirable category in baskets which can be limited by size and level of support in any future auctions. The amended bill is not available yet as this is written, but the basic approach is set out in the draft proposal introduced a few weeks ago. The net reason has been referred to by Grzegorz Wiśniewski from the Polish Institute for Renewable Energy as the end of PV and wind energy in Poland ("ustawa o OZE i ustawa „antywiatrakowa” zamykają możliwości realizacji programów inwestycyjnych w fotowoltaice i energetykę wiatrową"). 

While there are objectionable provision to the new laws that will likely be reversed by the European Commission if they are not taken out in subsequent proceedings in Poland, the basic matrix of using separate technology baskets and references prices has been approved by the Commission for auctions in other countries. I do not believe that this mechanism really does anything to satisfy the competition provisions of the European Treaty, but the Commission has pushed it, 

In Poland, the effects will be widespread. Wind and PV investors that have been quite active are starting to fold up their tents. The under current here is that these are mainly foreign firms and the new government has made no secret of its skepticism about encouraging foreign investment in Polish energy. The allegations that a 15% or even 25% RES share of electricity that relied mainly upon wind and PV will introduce really serious grid instability has been taken as a truism and not critically evaluated. Even the experience in Germany where the share is over 40% does not necessarily provide support for this assumption. 

We nevertheless are where we are. Until 2020 arrives and the RES target is missed, it is unlikely that there will be a major change in the support for new projects. The existing system will inevitably see changes with the EC decision in SA 37244, the pending state aid case on green certificates. But that system will cut off July 1, 2016, unless a dramatic political change occurs and it is extended. The extension of that law is probably the only viable means to assure Poland meets its 2020 commitment. The auctions will be delay construction until the last minute and seem to clearly not portend enough RES capacity to satisfy the requirement.

Biogas will do well under the new rules and will remain one of the few technologies that has enough support to justify new projects. The auction mechanism itself will restrict biogas development to some extent, knocking out the smaller developers and speculators. Small farm projects will also struggle with the proposed reference price (550 PLN/MWhr), especially with their limited co-generation potential. Biogas will also become more critical as the Circular Economy package gets approved and implemented, pushing organic wastes into biogas and away from landfills and incinerators. See presentations from Waste Management in the Circular Economy 2016, European Academy Conference, May 12-13, 2016, Berlin.

UPDATE: As of June 23, 2016, the new amendments are headed to the President of Poland for signature. I still expect something from the European Commission on green certificates. The net results will be a sharp decline in interest in wind and PV in Poland. Some complicated issues on co-firing including, not only the state aid issue, but the technically costs of going to higher biomass percentages of fuel as well as legal issues on burning waste. I am speculating that the inclusion of waste wood by the government may be a sign that they got feedback from the Commission that the reference price for co-firing in an auction will be lower than they wanted. I have no doubt whatsoever that the Polish Government is trying to push as much co-firing as possible, but there are limits that may impede this from going the way they want. Among other items mentioned above, some of the old plants that have been the biggest co-firers will be closed after 2020. The local biomass rule will likely be challenged by someone and could continue uncertainty over co-firing well past 2020.


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